Group Taxation |
From the date of Hungary’s accession to the EU, certain financial institutions and companies providing outsourced services to these entities have been entitled to group taxation for VAT purposes. The members of the group are allowed to provide services among each other without charging VAT. Since financial institutions usually do not have the right to deduct input VAT, this opportunity could represent tax savings regarding the outsourced services. However, at the same time, the VAT exempt revenue could partially influence the VAT recoverability status of the company providing the outsourced service. (If the service fee is exceptionally low, the fair market value should be taken into consideration instead of it.) The detailed rules regarding group taxation often change and become complicated, however, due to the potential VAT savings, this possibility attracts companies operating in the FSI sector. It is expected that the forthcoming VAT changes will affect the respective rules, both by releasing and by sharpening the relevant rules.